Quantocracy’s Daily Wrap for 01/21/2020

In our last post on the SKEW index we looked at how good the index was in pricing two standard deviation (2SD) down moves. The answer: not very. But, we conjectured that this poor performance may be due to the fact that it is more accurate at pricing larger moves, which occur with greater frequency relative to the normal distribution in the S&P. In fact, we showed that on a monthly basis, two

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One of the foundation concepts of the Alpha Architect investment philosophy is the utilization of Enterprise Multiples in the value discovery process. Enterprise multiples are often referred to as the business buyer metric and are a key valuation tool used by investment bankers and business buyers (see here). In addition, the empirical support for the metric is strong: Loughran and Wellman

Nave value factor portfolios have been in a drawdown since 2007. More thoughtful implementations performed well after 2008, with many continuing to generate excess returns versus the market through 2016. Since 2017, however, most value portfolios have experienced a steep drawdown in their relative performance, significantly underperforming glamour stocks and the market as a whole. Many investors